MW: Dollar edges down vs. most rivals ahead of Fed
Aussie dollar takes 'one-two' punch from GDP, RBA official comments
LONDON (MarketWatch) -- The dollar edged down in Europe trading Wednesday ahead of the conclusion of the U.S. Federal Reserve's two-day policy meeting, at which central bankers aren't expected to make any major policy changes.
The Fed is likely to leave the bank's short-term interest rate target intact at 0% to 0.25%, and unlikely to significantly alter language in its statement promising not to raise rates for a very long time. Lower rates tend to weigh on a currency by reducing the return on assets denominated in it.
"The FOMC is not expected to make any significant changes to its statement today, but this may take some of the steam out of the recent U.S. dollar rebound, given that there has been some increase in rate hike speculation of late," said strategists at BNP Paribas.
The euro (CUR_EURUSD 1.46, +0.00, +0.19%) was buying $1.4560, up from $1.4531 late Tuesday, while the dollar was at 89.63 yen, compared with 89.64 yen late Tuesday.
The British pound (CUR_GBPUSD 1.64, +0.01, +0.49%) rose to $1.6342, up from $1.6267, after data showed U.K. jobless claims unexpectedly declined in November, for the first time since February 2008.
Euro-zone purchasing managers indexes on manufacturing and services also were generally well received by the market.
A host of U.S. data, including consumer prices and housing starts, is due at 8:30.
The Australian dollar was down 0.6% against its U.S. counterpart, at 89.99 U.S. cents, after data showed Australia's economy grew in the third quarter at a slower pace and below market expectations, because of declines in private investment and net exports. See full story on Australian GDP.
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Deputy Governor of the Reserve Bank of Australia Ric Battellino reportedly said Wednesday that Australian monetary policy has returned to a normal range, and that the current level of deposit rates, housing loan rates and business loan rates would have been consistent, before the crisis, with a cash rate of at least 4.75%. The rate is now at 3.75%.
The Australian dollar "suffered a one-two punch" from the weaker-than-expected GDP data "and a strong suggestion from Deputy Governor Battelino that widening bank margins is doing much of the RBA's work for it," wrote Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney.
On Tuesday, the U.S. dollar rose to the highest level in more than two months as stronger-than-expected U.S. economic reports lifted the greenback and concerns over the potential for European banks encountering a new round of problems weighed on the shared euro. See Tuesday's Currencies report.
